FTC Settles First Case in New Crackdown on Fake Reviews

Inc. contributing editor Courtney Rubin was for five years a London-based staff writer for People magazine. Rubin, a former senior writer for Washingtonian magazine, has written for the New York Times magazine, Time, Marie Claire, and other publications. She is the author of The Weight-Loss Diaries.

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Thinking of balancing out some bad or unfair online customer reviews with better ones? Don't get the interns – or an advertising firm – to do it.

The Federal Trade Commission has settled with video game PR firm Reverb Communications over positive reviews the company posted at the iTunes store without disclosing it was being paid to do so. The company's fee often included a percentage of game sales. (A sampling of the fraudulent reviews: "Amazing new game" and "ONE of the BEST.")

Reverb was the first target of the FTC's new crackdown on deceptive online advertising. The agency in October introduced new guidelines for Internet endorsements and testimonials. Initially the rules were referred to widely as blogger rules – attempting to stop bloggers from dishing out positive reviews in exchange for free products or money – but the rules apply to anyone writing reviews on websites or promoting products through social media networks such as Facebook or Twitter. (The FTC explained: "While decisions will be reached on a case-by-case basis, the online post by a person connected to the seller, or someone who receives cash or in-kind payment to review a product or service, should disclose the material connection the reviewer shares with the seller of the product or service.")

Under the terms of the settlement, Reverb and its owner, Tracie Snitker, will delete any comments still on the Web and will refrain from engaging in such behavior in the future.

The company did not have to pay a fine nor admit wrongdoing. Snitker said in a statement to the New York Times: "Rather than continuing to spend time and money arguing, and laying off employees to fight what we believed was a frivolous matter, we settled this case and ended the discussion."

Why single out Reverb when fake user reviews are pervasive? The FTC complaint doesn't say, although the blog Mobile Crunch last August obtained documents that claimed that for 75 cents per paid app download, Reverb (specifically a "small team of interns") would provide services including "writing influential game reviews."

Mary Engle, director of the FTC's Division of Advertising Practices, said: 'Companies, including public relations firms involved in online marketing need to abide by long-held principles of truth in advertising. Advertisers should not pass themselves off as ordinary consumers touting a product, and endorsers should make it clear when they have financial connections to sellers.'